MIANGUL HASSAN AURANGZEB, J. Through the instant regular first appeal the appellant, MCB Bank Limited, impugns the order dated 11.12.2012 passed by the learned Judge Banking Court allowing application under Order VII, Rule 11, C.P.C. filed by respondents Nos.1, 2, 4 and 5/defendants Nos. 2, 3, 5 and 6 praying for the rejection of the plaint in the appellant's suit for recovery of Rs.22.432 million.
2. The appellant's case is that the appellant and Messrs Delta Tyre and Rubber Co. Ltd. ("Delta Tyre") entered into agreements for the issuance of documentary letters of credit for the import of materials for the manufacture of tyres and tubes for vehicles of different description. The details and the list of the fifteen documentary credit agreements executed in favour of foreign vendors are given in paragraph 3 of the plaint. Delta Tyre is said to have utilized the full finance limits under the fifteen documentary credit agreements. Delta Tyre had also created a floating charge on 26.02.1994 in the appellant's favour in the sum of Rs.10 million on its current and future assets in order to secure the finance availed from the appellant. A Letter of Hypothecation dated 20.02.1994 in the sum of Rs.10 million was also executed in order to secure repayment of the finance. A deed of floating charge dated 23.11.1996 was also executed by Delta Tyre enhancing the amount of the floating charge created on 26.02.1994 to Rs.25 million. The said deed was filed with the Registrar of Companies on 02.12.1996. Delta Tyre had also executed a Letter of Pledge dated 04.01.1997 pledging movable goods as security for the finance availed from the appellant.
3. The finance advanced to Delta Tyre had also been secured through the memorandum of deposit of title deeds of immovable properties owned by respondents No.1/defendant No.2 (Mr. Tariq Ahmad Khan Lodhi) and Respondent No. 5/defendant No, 6 (Mrs. Iftikhar Tariq), in addition to promissory note dated 04.01.1997 executed by respondent No.5/defendant No.6 (Mrs. Iftikhar Tariq) in the sum of Rs. 25 million.
4. In the plaint, it is also pleaded that Delta Tyre had requested the appellant on 04.01.1997 to convert the entire amount utilized by it under all the fifteen documentary credit agreements and mark up thereon totaling Rs.18.031 million into finance of import of materials and undertook to adjust the account within 90 days. Delta Tyre and the appellant executed an agreement on 30.01.1996 according to which Delta Tyre would sell the goods to the appellant for a total sum of Rs.18.031 million and simultaneously purchased the goods from the appellant at a price of Rs.22.432 million. The appellant's grievance was that Delta Tyre had failed to pay Rs.22.432 million on/or before 30.06.1997 which caused it to institute the suit for recovery.
5. The record also shows that a petition (C.O.No.20/1996) had been filed before the Hon'ble Peshawar High Court by Delta Tyre's creditors including the appellant for its winding up under Section 309 of the erstwhile Companies Ordinance, 1984. Vide order dated 03.05.1999, the appellant's application under Section 316 of the said Ordinance for permission to proceed with its suit for recovery was allowed. However, it was ordered that a decree passed in the said suit shall not be executed against the assets of Delta Tyre, which was under liquidation. A review application seeking recall of the said order dated 03.05.1999 was dismissed by the Hon'ble Peshawar High Court vide order dated 17.07.2001.
6. The suit for recovery of Rs.22.432 million was instituted by the appellant on 10.09.1997. The proceedings in the said suit culminated in the ex-parte judgment and decree dated 19.05.2001 passed by the learned Judge Banking Court whereby the said suit was decreed in the appellant's favour and against all the defendants jointly and severally. The other defendants in the suit were Delta Tyre's Chief Executive Officer and Directors. Apparently, the said judgment and decree was set-aside by the Hon'ble Lahore High Court vide order dated 08.12.2004 and the matter was remanded to the learned Banking Court.
7. After the matter was remanded to the learned Banking Court, an application under Order VII, Rule 11, C.P.C. was filed on behalf of respondent No.1/defendant No:2 (Mr. Tariq Ahmad Khan Lodhi), respondent No.2/defendant No.3 (Brig. (Retired) A. Aziz-ur-Rehman), respondent No.4/defendant No.5 (Mr. Ifikhar Ahmad Khan Lodhi) and respondent No.5/defendant No.6 (Mrs. Iftikhar Tariq), praying for the plaint in the appellant's suit to be rejected.
8. Vide impugned order dated 11.12.2012, the learned Judge Banking Court allowed the said application under Order VII, Rule 11, C.P.C. and rejected the plaint in the appellant's suit. The said order has been assailed by the appellant in the instant appeal. On 11.03.2013, this appeal was admitted to regular hearing and notices were issued to the respondents. Perusal of the order sheet shows that this Court on several occasions had passed orders for the issuance of notices to the respondents. Failure on the respondents part to tender appearance caused this Court to resort to the issuance of notices through publication in the newspaper. After publication was made in Daily Pakistan, this Court vide order dated 17.01.2023 decided to proceed ex-parte against the respondents and the matter was fixed for ex-parte arguments on 20.02.2023.
9. Learned counsel for the appellant, after narrating the facts leading to the filing of the instant appeal, submitted that although the Liquidator appointed by the Hon'ble Peshawar High Court had allowed the appellant's claim to the extent of Rs.2.8 million and after deducting 25% from the said amount as Liquidator's charges, an amount of Rs.25,95,758.67 was paid to the appellant; that the payment of the said amount did not satisfy the appellant's claim in the suit for recovery which as on 10.09.1997 was Rs.22.432 million; that the amount of Rs.25,95,758.67 had been paid by the Liquidator to the appellant from the proceeds of the sale of Delta Tyre's assets; that as per the report submitted by the Liquidator to the Hon'ble Peshawar High Court, the appellant's claim was for an amount of Rs.31,24,002.66 plus Rs.1,86,58,000/-; that the said report also shows that the appellant's finance was secured against the pledge of Delta Tyre's stocks and that the proceeds of the auction of the said stocks had been kept for distribution to the appellant and another creditor, i.e. National Bank of Pakistan; and that since through the liquidation proceedings an amount of only Rs.25,95,758.67 had been realized by the appellant, its claim in the suit would stand reduced to the said extent.
10. Learned counsel for the appellant further submitted that the finance advanced to Delta Tyre had also been secured through the memorandum of deposit of title deeds of immovable properties owned by respondent No. 1 /defendant No.2 (Mr. Tariq Ahmad Khan Lodhi) and respondent No.5/defendant No.6 (Mrs. Iftikhar Tariq) in addition to promissory note dated 04.01.1997 executed by respondent No.5/ defendant No.6 (Mrs. Iftikhar Tariq) in the sum of Rs.25 million; that the mere fact that Delta Tyre had been liquidated does not legally bar the appellant from proceeding with the suit for recovery of the unrecovered amount against the said respondents; that the title deeds of the immovable properties had been deposited and still remain deposited with the appellant and the promissory note was executed in order to secure the repayment of the amount advanced by the appellant; and that the liquidation of Delta Tyre does not result in the extinguishment of the appellant's claim against the guarantors. Learned counsel for the appellant prayed for the appeal to be allowed and for the impugned order and decree to be set-aside.
11. We have heard the contentions of the learned counsel for the appellant and have perused the record with his able assistance. The facts leading to the filing of the instant appeal have been set out in sufficient detail in paragraphs 2 to 8 above and need not be recapitulated.
12. On 10.09.1997, the appellant had filed a suit against Delta Tyre and its Directors for recovery of Rs.22.432 million plus mark up at the rate of 64 paisas per thousand rupees per day from 25.07.1997 till the date of the full and final recovery. The said suit was filed under the provisions of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 ("the 1997 Act").
13. The said suit was instituted after the filing of the petition (C.O.No.20/1996) before the Hon'ble Peshawar High Court for the liquidation of Delta Tyre. Vide order dated 03.05.1999, the appellant's application under section 316 of the said Ordinance for permission to proceed with its suit for recovery was allowed. However, it was ordered that a decree passed in the said suit shall not be executed against the assets of Delta Tyre, which was under liquidation.
14. The appellant admits that it had filed a claim of Rs.31,24,002.66 plus Rs. 1,86,58,000/- before the Liquidator, who in his report to the Hon'ble Peshawar High Court had accepted the claim of Rs.31,24,002.66 which was to be satisfied from the sale of Delta Tyre's stocks pledged with the appellant. After deducting 25 % as the Liquidator's charges, an amount of Rs.25,95,758.67 was paid to the appellant. This payment did not satisfy the appellant's claim in its suit. Since the Hon'ble Peshawar High Court, in its order dated 03.05.1999, had held that if a decree in the appellant's suit for recovery was passed by the learned Banking Court, it could not be executed against Delta Tyre's assets. The appellant wants to pursue its suit by recovering its debt from Delta Tyre's Directors who had deposited the title deeds of their immovable properties and who had submitted a promissory note in order to secure repayment of the finance advanced by the appellant to Delta Tyre.
15. The suit instituted by the appellant had been decreed on 19.05.2001 but the decree was set- aside by the Hon'ble Lahore High Court vide order dated 08.12.2004. After the matter was remanded, respondent No.1/defendant No.2 (Mr. Tariq Ahmad Khan Lodhi), respondent No.2/defendant No.3 (Brig. (Retired) A. Aziz-ur-Rehman), respondent No.4/defendant No.5 (Mr. Ifikhar Ahmad Khan Lodhi) and respondent No.5/defendant No.6 (Mrs. Iftikhar Tariq) filed an application under Order VII, Rule 11, C.P.C. praying for the plaint in the appellant's suit to be rejected.
16. In the said application, it was pleaded that Delta Tyre had been ordered to be liquidated vide order dated 16.11.1998 passed by the Hon'ble Peshawar High Court and that this fact had been brought to the notice of the learned Banking Court through application dated 13.11.1999. The primary ground on which the rejection of the plaint was sought was that Delta Tyre had already been ordered to be liquidated and the proceeds realized by the Liquidator could not be used to satisfy the appellant's claim. It was also pleaded that all claims against a company under liquidation had to be filed before the Liquidator under supervision of the Court that had ordered the liquidation.
Furthermore, it was pleaded that the appellant had also filed a claim (which was the subject matter of its suit before the learned Banking Court) before the Liquidator who had also granted a certain amount in favour of the appellant, and that after receiving the amount from the Liquidator, the appellant ought to have amended its suit.
17. Through the impugned order dated 11.12.2012, the said application was allowed and the plaint in the appellant's suit was rejected. In the said order, the learned Judge Banking Court had observed that in the plaint, it had not been pleaded that the appellant had filed a claim before the Liquidator which, had been accepted but there was still some outstanding liability. Furthermore, after referring sections 134, 135 and 141 of the Contract Act, 1872, the learned Judge Banking Court held that the liability of the guarantors was an independent and personal liability. It was also held that where the principal debtor had been absolved from any liability with regard to a loan or facility, the guarantors would not continue to be liable unless they were parties to the agreement between the principal debtor and the creditors. For the purposes of clarity, the penultimate paragraph of the said order dated 11.12.2012 is reproduced herein below:- "Section 134 of Contract Act, 1872 is about discharge of surety by release or discharge of principal debtors. Section 135 of the Contract Act, 1872 is relating to discharge of surety when creditor compounds with, give time to or agrees not to sue principal debtors. Section 141 of the said Act is about sureties right to benefit of creditors securities. It is noted that liability of guarantors was an independent liability and was a person[al] liability which the guarantors undertook. Where a creditor was unable to recover from the principal debtors, the liability of the guarantors arose only then. Where creditors and principal debtors had entered into an agreement and principal debtors was absolved from any liability with regard to loan or facility availed by him, the guarantors would not continue to be liable unless they were party to the said agreement between principal debtors and creditors."
18. The vital question that needs to be answered is whether the order dated 03.05.1999 passed by the Hon'ble Peshawar High Court in the liquidation proceedings, that if a decree is passed in the appellant's suit before the Banking Court it could not be executed against Delta Tyre's assets, would pose as a legal obstacle before the appellant in pursuing its suit against those Directors of Delta Tyre who were defendants in the suit and who had deposited the title deeds of their immovable properties and had issued a promissory note to secure repayment of the finance advanced by the appellant to Delta Tyre.
19. As mentioned above, in order to secure its repayment obligations to the appellant, Delta Tyre had executed a Letter of Pledge dated 04.01.1997 pledging movable goods as security for the finance availed from the appellant. A Letter of Hypothecation dated 20.02.1994 in the sum of Rs.10 million was also executed in order to secure repayment of the finance. A deed of floating charge dated 23.11.1996 was also executed by Delta Tyre enhancing to Rs.25 million the amount of the floating charge previously created on 26.02.1994. Since by virtue of the order dated 03.05.1999 passed by the Hon'ble Peshawar High Court, a decree that would be passed in the appellant's suit before the Banking Court could not be executed against any of Delta Tyre's assets, the said Letter of Pledge, Letter of Hypothecation and the floating charge would be of no use to the appellant in its suit before the Banking Court.
However, in order to secure the repayment obligations of Delta Tyre to the appellant, respondent No. 1/defendant No.2 (Mr. Tariq Ahmad Khan Lodhi) had deposited the original title deeds of the house built over Plot No.37 (New No.12), Street No.36, F-6/1, Islamabad measuring 666.6/9 square yards together with the existing and the future construction, fitting and fixtures to create an equitable mortgage so as to secure the repayment of the amount advanced the appellant to Delta Tyre. In this regard, a memorandum of the deposit of title deeds was executed by respondent No.1 on 20.02.1994. Additionally, respondent No.5/ defendant No.6 (Mrs. lftikhar Tariq) had deposited the original title deeds of land measuring 15 Marlas plus 10 Marlas bearing Khasra No.2990, Khewat No.376, Khatooni No.573 for the year 1989-90 in Mouza Kotha Kalan, Tehsil and District Rawalpindi together with the existing and the future construction, fitting and fixtures to create an equitable mortgage so as to secure the repayment of the amount advanced by the appellant to Delta Tyre.
Respondent No.2/defendant No.3 (Brig. (Retired) A. Aziz-ur-Rehman) had executed a promissory note dated 04.01.1997 on behalf of Delta Tyre in the sum of Rs.25 million to secure the repayment of the finance to the appellant.
20. The appellant could not execute the decree (it passed in its suit before the Banking Court) against the assets of Delta Tyre due to the order dated 03.05.1999 passed by the Hon'ble Peshawar High Court. This is because the appellant was not the only creditor of Delia Tyre. In the liquidation proceedings, the amount realized from the sale of Delta Tyre's assets had to be distributed by the Liquidator in accordance with the law and by satisfying the debts of preferential creditors. The report submitted by the Liquidator to the Hon'ble Peshawar High Court shows that an amount of Rs.1,04,51,506/- had been claimed as unpaid income tax by the Commissioner Inland Tax, Peshawar Circle against Delta Tyre for the period between 30.06.1992 to 30.06.1999. The said report shows that there were several other claims of banks/financial institutions against Delta Tyre. If the decree in the appellant's suit before the Banking Court had been permitted to be realized from the assets of Delta Tyre, there would hardly have been anything left to satisfy the claims of preferential creditors and all other creditors whose rights against Delta Tyre had preference over those of the appellant.
21. The liability of respondents No. 1/defendant No.2 (Mr. Tariq Ahmad Khan Lodhi) and respondent No.5/defendant No.6 (Mrs. lftikhar Tariq) to the appellant created through the memorandum of deposit of title deeds of immovable properties owned by them is most definitely not independent of the finance agreement between the appellant and Delta Tyre. But for the execution of the finance agreement, the memoranda of deposit of title deeds would not have been executed by the said respondents. The memorandum of deposit of title deed executed by respondent No. 1/defendant No.2 (Mr. Tariq Ahmad Khan Lodhi) explicitly provides that the said deed is being executed for securing the payment of the amount due and payable by Delta Tyre up to a maximum of Rs.1,00,00,000/- plus all service charges and all costs and expenses including liquidated charges incurred by the appellant. The memorandum of deposit of title deed executed by respondent No.5/defendant No.6 (Mrs. Iftikhar Tariq) also contains a similar provision.
22. The learned Banking Court realized that respondent No. 1/defendant No.2 (Mr. Tariq Ahmad Khan Lodhi) and respondent No.5/defendant No.6 (Mrs. Iftikhar Tariq) stood as guarantors for the repayment obligations of Delta Tyre to the appellant by executing the memoranda for the deposit of title deeds but absolved them from liability by holding that the appellant could not enforce or pursue its claim against Delta Tyre. The appellant's claim against Delta Tyre in no manner stood extinguished with the payment of Rs.25,95,758.76 by the Liquidator. The Hon'ble Peshawar High Court did not annul the finance agreement between the appellant and Delta Tyre but simply held that the decree that was to be passed in the appellant's suit before the Banking Court could not be enforced against Delta Tyre's assets. Delta Tyre's debt to the appellant had been secured through the memorandum of deposit of title deeds executed by respondent No. 1/defendant No.2 (Mr. Tariq Ahmad Khan Lodhi) and respondent No.5/defendant No.6 (Mrs. Iftikhar Tariq). The Hon'ble Peshawar High Court did not prevent the appellant or any of Delta Tyre's creditors from enforcing their debt by recourse to the guarantors or Delta Tyre's Directors who, in order to secure the repayment of the finance, had executed memoranda for the deposit of title deeds of their immovable properties.
23. Vide order dated 03.05.1999, the Hon'ble Peshawar High Court had clearly granted permission to the appellant to proceed with its suit. The permission to proceed with the suit would be worthless if the appellant could not realize its debt by recourse to Delta Tyre's Directors who had executed memoranda of deposit of title deeds.
24. The learned Trial Court absolved the Directors of Delta Tyre who had executed memoranda of the deposit of title deeds by holding that the liability of guarantors was an independent and personal liability, and that where a creditor was unable to recover from the principal debtors, the liability of the guarantors only arose in that case. It appears that the learned Trial Court has treated the memoranda of the deposit of title deeds as guarantees, and has treated the order dated 03.05.1999 passed by the Hon'ble Peshawar High Court as an order whereby the principal debtors/Delta Tyre has been discharged of its liability to the appellant. The learned Trial Court has made expressed reference to sections 134, 135 and 141 of the Contract Act, 1872. These sections are reproduced in Schedule-A hereto.
25. Under section 134 of the Contract Act, 1872, a surety is discharged when the principal debtor is released of his obligations to the creditors by reason of a contract executed between the creditors and the principal debtor. The said Section also discharges a surety where an act or omission of the creditor has the legal consequence of discharging the principal debtor. The order dated 03.05.1999 did not in any manner discharge Delta Tyre from its obligations to the appellant. By virtue of the said order, the suit instituted by the appellant against Delta Tyre and its Directors was permitted to continue but if any decree were to be passed in such a suit, it could not have been executed against the assets of Delta Tyre. The appellant had ranked as one of Delta Tyre's creditors in the liquidation proceedings, and in such proceedings it was paid Rs.25,95,758.67 by the Liquidator. This payment did not discharge Delta Tyre from paying the remaining amount of its debt to the appellant. Since the appellant could not have recourse to the assets of Delta Tyre in the event its suit for recovery was decreed, it would not mean that Delta Tyre's debt to the appellant stood extinguished. The decree that may be passed by the learned Banking Court can therefore be executed by recourse to assets mentioned in the memoranda of the deposit of title deeds which are admittedly not the assets of Delta Tyre.
26. Under section 135 of the Contract Act, 1872, a surety is discharged when a contract is executed between the creditor and the principal debtor by which the creditor makes a composition with, or promised to give time to, or not to sue the principal debtor. In the case at hand, at no material stage was a contract executed between the appellant and Delta Tyre whereby a composition was made or a promise was made by the appellant to give time to, or not to sue, Delta Tyre. The order dated 03.05.1999 passed by the Hon'ble Peshawar High Court did not prevent the appellant from proceedings from its suit for recovery against Delta Tyre but only restrained the execution of a decree that could be passed in such a suit against the assets of Delta Tyre. In the normal course, where the assets of the principal debtor are not sufficient to satisfy a decree, recourse can be made to the guarantors. It is not obligatory on the creditor to first approach the principal debtor for the satisfaction of the debt before calling upon the guarantors to discharge the obligation of the principal debtor. This is implicit in Section 128 of the Contract Act, 1872 which provides that the liability of a surety is co-extensive with that of the principal debtor unless it is otherwise provided by the contract.
27. Section 141 of the Contract Act, 1872 also did not have any implication in the case at hand as the said Section gives an entitlement to the surety to the benefit of every security which the creditor has against the principal debtor at the time when the contract of suretyship is entered into. The surety is discharged to the extent of the value of the security which the creditor loses. In the case at hand, the appellant did try and make recoveries from Delta Tyre by being one of the petitioners in the liquidation petition. The liability of the Directors who had executed the memoranda of the deposit of title deeds would stand reduced to the extent of the amount recovered by the appellant in the liquidation proceedings from the total amount of Delta Tyre's debt owed to the appellant. But the Directors of Delta Tyre who had executed the memoranda of the deposit of the title deeds could not be totally absolved from their liability simply on the ground that the appellant/the creditor was able to recover its debt partially in the liquidation proceedings or that the liquidation Court had ordered that the decree that may be obtained by the creditor could not be executed against the assets of Delta Tyre. Such partial recovery did not put at naught the liability of the Directors who had executed the memoranda of the deposit of title deeds for securing the repayment of Delta Tyre's debt to the appellant. In holding so, reliance is placed on the following case laws:-
(i) In the case of Abdul Ghaffar Adamjee v. National Investment Trust Lid. (2019 SCMR 812), Adamjee Polycrafis Limited ("A.P.L.") had availed a finance facility from the National Investment Trust ("N.I.T."). Failure on the part of A.P.L. to pay its dues caused the N.I.T. to file a recovery suit before the Banking Court. The Directors of A.P.L. were also defendants in the suit. The said suit was decreed and the decree was sought to be executed against A.P.L. as well as its Directors by treating them as guarantors on the basis of an undertaking executed by them contemporaneously with the finance facility. During the pendency of the recovery proceedings, A.P.L. had gone into liquidation and there was no likelihood for the N.I.T. to recover any amount in the liquidation proceedings. The N.I.T. sought to have the decree in its favour executed by proceeding against A.P.L.'s Directors. A.P.L.'s Directors resisted the proceedings against them by taking the plea that the undertaking sworn by them did not make them personally liable to pay any of the defaulted sum owed by A.P.L. It was held that the undertaking sworn by the Directors of A.P.L. was in the nature of a contract of indemnity and since A.P.L. had been left with no assets to pay its debt to the N.I.T., the latter was well within its rights to initiate recovery against A.P.L.'s Directors in their personal capacity as indemnifiers.
(ii) In the case of Sultan-ul-Afreen v. District Officer (Revenue), City District Government Karachi (2013 CLD 1280), the Division Bench of the Hon'ble High Court of Sindh held that the liability of a company to repay its loan cannot be treated as the liability of its Directors unless the Directors had executed documents acknowledging and/or assuming the liability of the company upon themselves in their personal capacity as sureties, guarantors or indemnifiers. In this regard, paragraph 10 of the said report is reproduced herein "10. From the above discussed case-laws, it is abundantly clear that the liability of the Company cannot be treated or foisted as the liability of the directors and or its shareholders merely because any contract is signed by any of the directors/shareholder and or any other person authorized by the company, for and on behalf of the company, unless of course in situation where directors or persons other than the company could also be personally liable firstly; where the director / and other person has executed some documents acknowledging and or assuming the liability of the company upon himself in his personal capacity as surety, guarantor or indemnifier for the company as per provisions of Contract Act, 1872 (such is normal and usual in banking and commercial transaction)."
(iii) In the case of Mubarak Ali v. First Prudential Mudaraba (2006 CLD 927), a creditor had instituted a suit for recovery against the debtor before a Banking Court. In the suit, the creditor did not implead the persons who had executed the memorandum of deposit of title deeds to secure the repayment of the debt. Subsequently, another suit was instituted by the creditor against the persons who had executed such memorandum. An objection was raised that the second suit was barred under the provisions of Order II, Rule 2, C.P.C. as the creditor had omitted to implead the persons who had executed the memorandum in the first suit. This objection was spurned by the Hon'ble High Court of Sindh which held that the execution of the memorandum of the deposit of title deeds had furnished an independent cause of action in favour of the creditor to obtain a decree against the persons who had executed such memorandum.
28. In view of the above, the instant appeal is allowed; the order dated 11.12.2012 passed by the learned Judge Banking Court is set-aside; and the matter is remanded to the said Court with the direction to decide the appellant's suit on merits.
Schedule-A
134. The surety is discharged by any contract between the creditor and the principal debtor, by which the principal debtor is released, or by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor.
135. A contract between the creditor and the principal debtor, by which the creditor makes a composition with, or promises to give time to, or not to sue, the principal debtor discharges the surety, unless the surety assents to such contract.
141. A surety is entitled to the benefit of every security which the creditor has against the principal debtor at the time when the contract of surety ship is entered into, whether the surety knows of the existence of such security or not; and, if the creditor loses, or, without the consent of the surety, parts with such security, the surety is discharged to the extent of the value of the security.